Demat vs Trading Account: What is the difference and how do they work?
Also Read: The Ultimate Guide to Opening a Demat Account in 2024A demat account just converts your shares from a physical form to an electronic format. To put it simply, a demat account is like your bank locker. You can hold your shares, bonds, debentures, mutual funds, exchange traded funds and other securities in your demat account.But just like your bank locker cannot work independently from your bank account, demat accounts can operate only in tandem with trading accounts.
All demat accounts have a unique number just like bank accounts. But unlike bank lockers where you store your valuables, you can keep your demat accounts absolutely empty. You can open a demat account with zero or nil balance and it can be empty with no shares in it.
Also Read: Around 49% of new demat accounts in FY24 opened by investors below 25, says Paarth Dhar of Angel OneTrading account, as the name suggests, is used to buy and sell shares in the stock markets and transact in other forms of securities.
Just like the demat account, a trading account also has a unique number.Both the demat and trading account can be operated online. But it is advisable to have both the accounts with the same DP (Depository Participant) as you would be able to trade seamlessly in such a case. Online access has made stock trading a simple exercise.
Also Read: How does a demat account contribute to financial inclusion? MintGenie explainsSince the demat account will only hold your securities and cannot be used for transactions, its usage will be negated if you do not have a trading account.
